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Inequality has
been rising in most countries around the world, but it has played out in
different ways across countries and regions. The United States, it is
increasingly recognised, has the sad distinction of being the most
unequal advanced country, though the income gap has also widened to a
lesser extent in Britain, Japan, Canada and Germany. Of course, the
situation is even worse in Russia and some developing countries in Latin
America and Africa. But this is a club of which we should not be proud
to be a member.

Some big countries —
Brazil, Indonesia and Argentina — have become more equal in recent
years, and other countries, like Spain, were on that trajectory until
the economic crisis of 2007-2008.

Singapore has had the
distinction of having prioritised social and economic equity while
achieving very high rates of growth over the past 30 years — an example
par excellence that inequality is not just a matter of social
justice but of economic performance. Societies with fewer economic
disparities perform better — not just for those at the bottom or the
middle, but overall.

It is hard to believe how
far this city-state has come in the half-century since it attained
independence from Britain in 1963. (A short-lived merger with Malaysia
ended in 1965.) Around the time of independence, a quarter of
Singapore’s workforce was unemployed or underemployed. Its per-capita
income (adjusted for inflation) was less than a tenth of what it is
today.

There were many things
that Singapore did to become one of Asia’s economic “tigers”, and
curbing inequalities was one of them. The government made sure that
wages at the bottom were not beaten down to the exploitative levels they
could have been.

The government mandated
that individuals save into a “provident fund” — 36 per cent of the wages
of young workers — to be used to pay for adequate healthcare, housing
and retirement benefits. It provided universal education, sent some of
its best students abroad, and did what it could to make sure they
returned. (Some of my brightest students came from Singapore.)

There are at least four
distinctive aspects of the Singaporean model, and they are more
applicable to the US than a sceptical American observer might imagine.

First, individuals were
compelled to take responsibility for their own needs. For example,
through the savings in their provident fund, around 90 per cent of
Singaporeans became homeowners, compared to about 65 per cent in the US
since the housing bubble burst in 2007.

Second, Singaporean leaders realised they had to break the pernicious, self-sustaining cycle of inequality
that has characterised so much of the West. Government programmes were
universal but progressive: While everyone contributed, those who were
well off contributed more to help those at the bottom, to make sure that
everyone could live a decent life, as defined by what Singaporean
society, at each stage of its development, could afford. Not only did
those at the top pay their share of the public investments, they were
asked to contribute even more to helping the neediest.

Third, the government
intervened in the distribution of pre-tax income — to help those at the
bottom, rather than, as in the US, those at the top. It weighed in,
gently, on the bargaining between workers and firms, tilting the balance
towards the group with less economic power — in sharp contrast to the
US, where the rules of the game have shifted power away from labour and
towards capital, especially during the past three decades.

Fourth, Singapore
realised that the key to future success was heavy investment in
education — and more recently, scientific research — and national
advancement would mean all citizens — not just children of the rich —
would need access to the best education for which they were qualified.

Mr Lee Kuan Yew,
Singapore’s first Prime Minister, who was in power for three decades,
and his successors took a broader perspective on what makes for a
successful economy than a single-minded focus on gross domestic product,
though even by that imperfect measure of success, it did splendidly,
growing 5.5 times faster than the US has since 1980.

More recently, the
government has focused intensively on the environment, making sure that
this packed city of 5.3 million retains its green spaces, even if that
means putting them on the tops of buildings.

In an era when
urbanisation and modernisation have weakened family ties, Singapore has
realised the importance of maintaining them, especially across
generations, and has instituted housing programmes to help its ageing
population.

Singapore realised that
an economy could not succeed if most of its citizens were not
participating in its growth or if large segments lacked adequate
housing, access to healthcare and retirement security. By insisting that
individuals contribute significantly towards their own social welfare
accounts, it avoided charges of being a nanny state. But by recognising
the different capacities of individuals to meet these needs, it created a
more cohesive society. By understanding that children cannot choose
their parents — and that all children should have the right to develop
their innate capacities — it created a more dynamic society.

Singapore’s success is
reflected in other indicators as well. Life expectancy is 82 years,
compared with 78 in the US. Student scores on maths, science and reading
tests are among the highest in the world — well above the average for
the Organisation of Economic Cooperation and Development, the world’s
club of rich nations, and well ahead of the US.

The situation is not perfect: In the last decade, growing income inequality
has posed a challenge for Singapore, as it has for many countries in
the world. But Singaporeans have acknowledged the problem, and there is a
lively conversation about the best ways to mitigate adverse global
trends.

Some argue that all of
this was possible only because Mr Lee, who left office in 1990, was not
firmly committed to democratic processes. It is true that Singapore, a
highly centralised state, has been ruled for decades by Mr Lee’s
People’s Action Party. Critics say it has authoritarian aspects:
Limitations on civil liberties, harsh criminal penalties, insufficient
multiparty competition, and a judiciary that is not fully independent.
But it is also true that Singapore is routinely rated one of the world’s
least corrupt and most transparent governments, and that its leaders
have taken steps towards expanding democratic participation.

Moreover, there are other
countries committed to open, democratic processes that have been
spectacularly successful in creating economics that are both dynamic and
fair — with far less inequality and far greater equality of opportunity than in the US.

Each of the Nordic
countries has taken a slightly different path, but each has impressive
achievements of growth with equity. A standard measure of performance is
the United Nations Development Programme’s inequality-adjusted
Human Development Index, which is less a measure of economic output
than it is of human well-being. For each country, it looks at citizens’
income, education and health, and makes an adjustment for how access to
these are distributed among the population. The Northern European
countries (Sweden, Denmark, Finland and Norway) stand towards the top.

In comparison — and especially considering its No 3 ranking in the non-inequality-adjusted
index — the US is further down the list, at No 16. And when other
indicators of well-being are considered in isolation, the situation is
even worse: The US ranks 33rd on the United Nations Development Programme’s inequality-adjusted life expectancy index, just behind Chile.

Economic forces are global; the fact that there are such differences in outcomes (both levels of inequality
and opportunity) suggests that what matters is how local forces — most
notably, politics — shape these global economic forces. Singapore and
Scandinavia have shown that they can be shaped in ways to ensure growth
with equity.

Democracy, we now recognise, involves more than periodic voting. Societies with a high level of economic inequality inevitably wind up with a high level of political inequality:
The elites run the political system for their own interests, pursuing
what economists call rent-seeking behaviour, rather than the general
public interest. The result is a most imperfect democracy.

The Nordic democracies,
in this sense, have achieved what most Americans aspire towards: A
political system where the voice of ordinary citizens is fairly
represented, where political traditions reinforce openness and
transparency, where money does not dominate political decision-making,
and where government activities are transparent.

I believe the economic
achievements of the Nordic countries are in large measure a result of
the strongly democratic nature of these societies. There is a positive
nexus not just between growth and equality, but between these two and
democracy. (The flip side is that greater inequality not only weakens our economy, it also weakens our democracy.)

A measure of the social
justice of a society is the treatment of children. Many a conservative
or libertarian in the US assert that poor adults are responsible for
their own plight — having brought their situation on themselves by not
working as hard as they could. (That assumes, of course, that there are
jobs to be had — an increasingly dubious assumption.)

But the well-being of
children is manifestly not a matter for which children can be blamed (or
praised). Only 7.3 per cent of children in Sweden are poor, in contrast
to the US, where a startling 23.1 per cent are in poverty. Not only is
this a basic violation of social justice, but it does not bode well for
the future: These children have diminished prospects for contributing to
their country’s future.

Discussions of these
alternative models, which seem to deliver more for more people, often
end by some contrarian assertion or other about why these countries are
different, and why their model has few lessons for the US. All of this
is understandable. None of us likes to think badly of ourselves or of
our economic system. We want to believe that we have the best economic
system in the world.

Part of this
self-satisfaction, though, comes from a failure to understand the
realities of the US today. When Americans are asked what is the ideal
distribution of income, they recognise that a capitalist system will
always yield some inequality — without it, there would be no
incentive for thrift, innovation and industry. And they realise that we
do not live up to what they view as their “ideal”. The reality is that
we have far more inequality than they believe we have, and that
their view of the ideal is not too different from what the Nordic
countries actually manage to achieve.

Among the American elite —
that sliver of Americans who have seen historic gains in wealth and
income since the mid-1970s even while most Americans’ real incomes have
stagnated — many look for rationalisations and excuses. They talk, for
instance, about these countries’ being homogeneous, with few immigrants.
But Sweden has taken in large numbers of immigrants (roughly 14 per
cent of the population is foreign-born, compared with 11 per cent in
Britain and 13 per cent in the US). Singapore is a city-state with
multiple races, languages and religions. What about size? Germany has 82
million people and has substantially greater equality of opportunity
than the US, a nation of 314 million (although inequality has been rising there too, though not as much as in the US).

It is true that a legacy
of discrimination — including, among many things, the scourge of
slavery, America’s original sin — makes the task of achieving a society
with more equality and more equality of opportunity, on a par with the
best performing countries around the world, particularly tricky. But a
recognition of this legacy should reinforce our resolve, not diminish
our efforts, to achieve an ideal that is within our reach and is
consistent with our best ideals.

THE NEW YORK TIMES

ABOUT THE AUTHOR:

Joseph Stiglitz is a
Nobel laureate in economics, a Columbia professor and former Chairman of
the Council of Economic Advisers and Chief Economist for the World
Bank.